The following information was obtained from the books of Wanton ltd for the year ended 31st December 2014.
Ksh
Ordinary share capital (par value ksh 30) 3,600,000
8% preference shares (par value ksh 25) 2,400,000
15% debenture stock (issue price ksh 100) 800,000
20% bank loan 1,200,000
8,000,000
Additional information;
i. The market price is as follows
• Ordinary shares ksh 40
• 8% preference shares ksh 32
• 15% debentures ksh 90
ii. The company has maintained a dividend per share of ksh 5.50 per annum and it is expected to grow in perpetuity at 2%
iii. Corporation task is at 30%
Required
a) Compute the cost of each source of capital (12 marks)
b) Calculate the Weighted average cost of capital (8 marks)
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